Why entrepreneurs should avoid federal fixation

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AJ Shankar founded Everlaw and has computer science degrees from UC Berkeley and Harvard University.

Over the past year, the presidential campaign captured the world’s attention. Now all eyes are on Washington and the emerging administration. Indeed, the federal government dominates the news. To put it mildly, there’s no sign that will change anytime soon.

It’s easy to forget that much of the government work that affects our daily lives takes place closer to home. Away from the klieg lights of DC and the hoopla of the Sunday shows, state, county and city governments keep plugging away, building schools, funding transit, negotiating contracts, setting environmental policies and more.

Entrepreneurs in enterprise technology often experience a similar federal fixation. When you’re just starting out, the federal government is a tremendously tempting customer. Few logos carry more clout on your website than a three-letter federal agency. And with so many potential customers in a 70-square-mile radius (a bit more if you include offices across the border in Maryland and Northern Virginia), the geography of Washington makes it easy to open a small sales office with the potential to close millions in sales.

By contrast, selling to state governments might seem impractical. It means working with prospects in 50 capitals, strung across thousands of miles, each operating under different regulations and policies.

But it would be a mistake to ignore state customers altogether. They may not wield the massive budgets of federal agencies — though departments in the largest states can come close — but you don’t need to go after all 50 states to justify the investment of marketing to state governments.

For one thing, distance doesn’t mean as much as it used to. Webinars and video demos can get the ball rolling without boots on the ground. A free, limited version of your software can be your best ambassador. “Land and expand” isn’t just for the Fortune 500.

Horror stories about government procurement are often exaggerated.

And for all the talk of bureaucratic gridlock, state departments can be surprisingly nimble compared to their federal counterparts. That’s especially true if you’re selling SaaS software. Government buyers may not be able to spin up an account with their credit card the way line-of-business customers might, but procurement is still much easier if they don’t have to provision IT themselves.

That’s not to understate the challenges. Bureaucracy is real. Procurement can be painful. And some products — especially hardware — are difficult to sell from a distance. Here are a few lessons to make the process easier.

A clear price structure is essential: Even more than most enterprises, state governments have systems in place to scrutinize budgets and hold agencies accountable. Competitive bidding is often mandatory. Many vendors get stuck because their pricing is hard to decipher. Price transparency will grease the skids and give you a better chance of getting to contract.

Caps are common: Government agencies work to strict budget thresholds. When they run out of cash, it’s much harder — sometimes impossible — to dip into discretionary funds. If they go over, they stop working. That’s not good for you or them. Even more than usual, it’s important to scope your proposal accurately.

Security is critical: Security requirements are often much tighter in the public sector than in the private sector. State agencies may have more leeway than federal, but if they administer federal programs, they need to abide by the stringent standards of the Federal Information Security Management Act (FISMA). In those cases, you need to be FISMA-compliant, full-stop. Other agencies may be more flexible. Some may be satisfied with an overview of your security infrastructure. Others will want to see that you’ve been certified to a standard like SOC 2 Type II. Either way, you need to do your homework and be able to provide assurance on security. Otherwise it can easily become a deal-breaker.

Experience matters: Horror stories about government procurement are often exaggerated, but there’s a kernel of truth to them. A successful proposal will often have to pass vendor review, competitive bidding, ethical restrictions and the protest process. You need someone on your contracts team who has done this before — a steady hand who understands customers’ needs and can see you to the finish line. It’s worth investing in experience.

People matter too: Once you get past the red tape, government decision-makers are just like any others. In some ways, the human touch is even more important in government sales. Communication, responsiveness, face-to-face interaction — even if only by video chat — all help your cause. Friendly contacts can help you navigate the bureaucracy, make introductions and smooth your path through the RFP.

While the federal government gets the lion’s share of our attention, it’s far from the whole story. Sometimes it’s not even the most important story. That’s worth remembering as an entrepreneur, just as it is for private citizens.